Davis & Anor & Cusson & Ors
[2018] FamCA 119
•2 March 2018
FAMILY COURT OF AUSTRALIA
| DAVIS AND ANOR & CUSSON AND ORS | [2018] FamCA 119 |
| FAMILY LAW – COSTS – Where the husband’s parents filed an Application in the Case seeking rental monies be paid to them and summary judgment delivered in their favour – Where consent orders made in accordance with the Response of the wife’s Trustee in bankruptcy – Where the application for summary judgment withdrawn – Where the Trustee seeks costs – Where the Trustee had made a previous offer of settlement – Where that offer was rejected – Where consent orders made in accordance with the Trustee’s offer – Where the husband’s parents are wholly unsuccessful – Where the husband’s parents’ application was misconceived – Order made for costs. |
| Family Law Act 1975 (Cth) ss 117 |
| Penfold v Penfold (1980) 144 CLR 311 |
| APPLICANTS: | Mr B Davis and Ms Davis |
| RESPONDENT: | Mr Cusson (Trustee in Bankruptcy) |
| SECOND RESPONDENT: | Ms Peterson |
| THIRD RESPONDENT: | Mr Davis |
| FILE NUMBER: | PAC | 1208 | of | 2016 |
| DATE DELIVERED: | 2 March 2018 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Hannam J |
| HEARING DATE: | 16 October 2017 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANTS: | Bligh Chambers |
| SOLICITOR FOR THE RESPONDENT: | Mercantile Legal | |
| SOLICITOR FOR THE SECOND RESPONDENT: | Reimer Winter Williamson The Lawyers | |
| THE THIRD RESPONDENT: | Mr Davis in person |
Orders
That Mr Davis and Ms Davis pay the Trustee in Bankruptcy Mr Cusson’s costs from 12 October 2017 of and incidental to the Application in a Case filed 26 July 2017 as agreed or assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Davis and Anor & Cusson and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 1208 of 2016
| Mr B Davis and Ms Davis |
Applicants
And
| Mr Cusson (Trustee in Bankruptcy) |
Respondent
And
Ms Peterson
Second Respondent
And
Mr B Davis
Third Respondent
REASONS FOR JUDGMENT
Introduction
These Reasons relate to an application for costs made by the Trustee in Bankruptcy of the wife (“the Trustee”) in property settlement proceedings. The Trustee seeks that the Third and Fourth Respondents in the substantive proceedings pay the Trustee’s costs of an unsuccessful Application in a Case brought by those parties.
The substantive proceedings relate to a parenting and property dispute between Ms Peterson (“the wife”) and Mr Davis (“the husband”) commenced by the wife in March 2016. As the wife is an undischarged bankrupt, the Trustee for the wife’s bankrupt estate is a party as are Mr B Davis and Ms Davis, the husband’s parents (“the Respondents”) who assert an interest in property which is contended to form part of the matrimonial assets available for distribution.
On 26 July 2017 the Respondents filed an Application in a Case seeking that the rental income from two properties (“the properties”) in the name of the wife and husband be paid to them. On 16 August 2017 the Respondents amended their Application to seek a second order that they receive summary judgment in their favour in respect of orders sought in their Response to the wife’s Initiating Application. The Respondents contend that the wife and husband hold the properties on trust for the Respondents and they seek a declaration to that effect and orders transferring the property to them.
The Trustee’s Response to the Respondents’ Application in a Case sought orders that the rent from the properties be paid to the Trustee’s trust account. The Trustee also sought that the parties account to the Trustee for past and future rent, that the Trustee pay costs associated with the properties from the rental income, that the Trustee account to the parties every three months in relation to the rental monies, that the Trustee be paid his reasonable costs from those monies and that his costs of the Application be paid.
On 16 October 2017 the matter was before the Court to determine the Respondent’s Application in a Case. On that date without considering the merits of the application it was resolved by orders made by consent as follows:
(1)The parties pay previous and future rent or other income received from 5 October 2011 in respect of the [properties] to the [Trustee]’s trust account.
(2)The parties provide an account to the [Trustee] for previous and future rent or other income received from 5 October 2011 in respect of the [properties].
(3)The [Trustee] pay any amounts available for payment of costs associated with those properties from those monies.
(4)The [Trustee] account to the parties every 3 months in relation to monies received.
The Trustee also pressed for the order that his costs in relation to the application be paid by the Respondents. After hearing submissions on behalf of the Trustee and on behalf of the Respondents judgment was reserved.
The question for determination is whether there are circumstances that justify departing from the usual rule that each party shall bear his or her own costs.
Background
The wife and husband began living together in 1999. They did not marry but had three children currently aged 16, 13 and 11. Parenting proceedings in relation to the children, who live with the wife and spend supervised time with the husband, are ongoing.
The parties purchased a property at Suburb B in 2002 for $225,000. That property is encumbered by a mortgage to the National Australia Bank which is a secured creditor of the wife.
In 2001 and then 2003 the Respondents purchased the properties that were the subject of their Application in a Case.
In 2008 the properties were transferred to the husband and wife by the Respondents. Both properties are subject to mortgages with the Commonwealth Bank of Australia which is a secured creditor of the wife. There is significant dispute as to the nature of the transfer and whether consideration was paid to the Respondents by the husband and wife. The Respondents and the husband contend no money was exchanged (despite signed transfers indicating otherwise) and that the husband and wife hold the properties on trust for the Respondents. The wife and Trustee dispute these contentions.
The parties separated in 2010.
In October 2011 the wife filed a debtor’s petition in the Federal Court of Australia which included a signed Statement of Affairs in which the wife declared she and the husband jointly owned the properties. The Official Trustee in Bankruptcy was appointed as the trustee of her estate and subsequently registered caveats on the wife’s properties.
On 2 February 2012 the Trustee in these proceedings was appointed trustee of the property of the wife. Correspondence was sent to the husband seeking a response from him to the Official Trustee in Bankruptcy’s report to creditors dated 10 October 2011.
While the Trustee did not receive a response from the husband, in March 2012 he received a letter from solicitors for the Respondents asserting that the wife and husband held the properties on trust for the Respondents. The Trustee responded to that letter indicating that the properties were owned by the husband and wife and the mortgages secured over those properties were in their joint names.
Having received no evidence supporting the Respondent’s assertion of a trust, on 31 July 2013 the Trustee was registered on the title of the properties as tenant in common with the husband.
The Trustee subsequently became aware that one of the subject properties was being rented and in early 2016 requested that the real estate agents pay the rent from that property into the Trustee’s trust account. At a later date the Trustee became aware the second subject property was also being rented. No rent had been received by the Trustee for either of the properties.
The wife commenced parenting and property proceedings in March 2016 in the Federal Circuit Court.
In her Initiating Application, the wife sought orders that she be granted leave to commence proceedings out of time, that she receive 65 per cent of the matrimonial property, there be a superannuation splitting order made in her favour and that the debts associated with her bankruptcy be treated as debts of the relationship and deducted from the asset pool.
On 19 September 2016 the Respondents filed an Application seeking to be joined to the property proceedings and on 15 November 2016 an order was made to that effect.
On 23 June 2017 the matter was transferred to this Court.
On 8 August 2017 orders were made for the parties to attend mediation and the Respondents were directed to file a Response setting out the relief they sought.
On 26 July 2016 the Respondents filed the Application in a Case relevant to this judgment which was amended on 16 August 2017.
The parties appeared before the Registrar on three occasions in relation to the Application in a Case before the matter was listed before a Judge.
On 16 October 2017 the matter came before me in the Judicial Duty List and orders were made by consent as outlined earlier in these Reasons.
The law and Discussion
The Trustee is seeking that his costs of and incidental to the Respondent’s Application in a Case be paid by the Respondents as agreed or assessed.
Applications for costs in this Court are the exception to the rule. Section 117(1) of the Family Law Act 1975 (“the Act”) sets out the general rule as being that each party is to bear his or her own costs. That principle is, however, subject to subsection (2) which gives a Court a discretion to make an order for costs if there are circumstances that it in the Court’s opinion justify it in doing so. Any such order for costs is to be pursuant to section 117(2) “as the Court considers just”.
The High Court in Penfold v Penfold[1] indicated that the circumstances justifying an order for costs need not be exceptional, but they must, of themselves, be sufficient to justify the making of an order for costs. Therefore, there is no additional or special onus on an applicant seeking an order for costs other than the Court finding justifiable circumstances to make such an order.
[1] (1980) 144 CLR 311
Section 117(2A) sets out the relevant matters, if any are applicable, to which the Court is to have regard in considering an order for costs. The matters relevant in this case are considered below.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
Orders made by consent on 16 October 2017 are in almost identical terms to those sought by the Trustee in his Response to the Respondents’ Application in a Case.
Those orders finalise the Respondents’ Application in a Case for the rent from the properties to be paid into their account. The second order sought by the Respondents that they receive summary judgment in their favour was withdrawn on 16 October 2017. I also declined to deal with the alternative order sought that the Respondents’ case with respect to their asserted beneficial interest in the properties be heard in the course of the duty list as their position will be appropriately dealt with at final hearing.
It is clear that the Respondents have been wholly unsuccessful in their application for the payment of rent from the properties asserted to be beneficially owned by them. The merits of their application for summary judgment which was withdrawn will be dealt with later in these Reasons.
Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer
On Thursday 12 October 2017 the Trustee’s solicitor wrote to the solicitors for the Respondents offering to settle the application on the basis of consent orders to the effect that the Respondents dismiss (presumably withdraw) their Application or orders be made in terms of the Trustee’s Response and that each party bear their own costs.
That letter was responded to by the Respondents’ solicitors in an email dated Friday 13 October 2017. In that email a counter offer was made in essence consenting to orders (1) to (4) of the Trustee’s Response but also seeking agreement from the Trustee that the Court hear the case set out in the Respondents’ Reply and Points of Claim. The email and counter offer were not responded to by the Trustee prior to the Court appearance on 16 October 2017.
It is submitted on behalf of the Trustee that the issue could have been settled on 12 October 2017 as the orders made by consent on 16 October 2017 are in the same terms as those proposed by the Trustee in the offer of settlement. It is further submitted that in those circumstances it was unreasonable for the Respondents to decline the offer made by the Trustee.
It is argued by the Respondents that if the Trustee had accepted their counter offer proposed on 13 October 2017 there would have been no need for the court event on 16 October 2017 as the orders proposed in that counter offer were close to those made by consent. As I understand it, the Respondents contend that they could not have then consented to the offer made by the Trustee as he was seeking all rent in relation to the properties be paid to him, including past rent paid both prior and subsequent to the Trustee being appointed in 2011.
While I accept that the counter offer made by the Respondents was substantially the same as orders made by consent on 16 October 2017, it was also substantially the same as the offer made by the Trustee the day earlier. The only substantive difference between the two offers was the additional order sought by the Respondents in their counter offer that their case as to asserted beneficial ownership of the properties be heard.
Despite the Respondents’ submission that they could not consent to the Trustee’s offer in the terms proposed on 12 October 2017 the counter offer made by them was in the same terms proposed by the Trustee and they consented an order in those terms on 16 October 2017. In my view the Respondents’ submission asserting reasons why they could not accept the Trustee’s offer cannot be accepted in circumstances where they did not propose an alternative order to rectify the problems they allege are inherent in the order sought by the Trustee.
Accordingly, I am satisfied that if the Respondents had accepted the offer made on 12 October 2017 consent orders could have been made earlier and without the need for the 16 October 2017 court event.
Such other matters as the court considers relevant
It is submitted by the Trustee that in addition to being wholly unsuccessful as to the order concerning rent, the Respondents’ pursuit of an application with respect to summary judgment was misconceived and fanciful given there is a real issue to be tried in relation to the properties.
It is submitted on behalf of the Respondents that an application for summary judgment was necessary in order to force the Trustee to perform his proper duties. The Respondents’ claim that the Trustee has been derelict in his duties in collecting money from the properties due to the husband and possibly due to the Respondents without accounting for that money.
It is also submitted on behalf of the Respondents that the Trustee’s proposal of an order, which was later withdrawn, that he be paid his reasonable costs from the rental monies was not an order that could be made as the Trustee has an obligation to act gratuitously and he was never entitled to be paid.
I do not accept either submission made on behalf of the Respondents. The Trustee’s entitlement to remuneration is determined under the Bankruptcy Act 1966 (Cth) but it was not improper for the Trustee to seek an order for remuneration in proceedings in this Court. In any event, the order sought by the Trustee in relation to his remuneration was not pressed in the offer of settlement made to the Respondents on 12 October 2017 and was appropriately withdrawn very shortly after consent orders were made on 16 October 2017.
I also do not accept that it was necessary for the Respondents to bring an application for summary judgment in order to “force” the Trustee to perform his proper duties. Summary judgment is an extremely rare occurrence in this Court and was never warranted in this case when there are significant and complex factual disputes to be determined and a real issue to be tried in relation to the entitlement of each of the parties to the properties. Further, there was never a real possibility that the determination of the existence of a constructive trust, which requires evidence and cross examination would be heard in the course of the judicial duty list.
In that context, the Respondents’ pressing of their orders for summary judgment or having their case heard was the only reason the matter came before the Court on 16 October 2017 and was the reason consent orders could not be made at an earlier date.
Conclusion
Balancing the relevant matters that I have set out and attaching weight to the context in which the application for costs was made, I am satisfied that a departure from the usual rule that each party pay their own costs is justified.
As the matter could have been settled by consent following the Trustee making his offer of settlement, an order is made that the Respondents should pay the Trustee’s costs of and incidental to the Application in the Case filed 26 July 2017 as agreed or assessed from 12 October 2017.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 2 March 2018.
Legal Associate:
Date: 2 March 2018